Gold As A Store Of Value

Tyler Durden's picture


For those with doubts after a nine-month correction in gold (and especially over the last few days), Brent Johnson of Santiago Capital reminds us that 'nothing has changed'. Starting from the three propositions that: 1) Money is extremely misunderstood; 2) 'Fiat' money is a poor store of value; and 3) Gold is an excellent store of value, Johnson provides, in a little under 10 minutes, a succinct summary of all the reasons to remain long the shiny yellow stuff. As it reverts to being 'the most marketable commodity' once again, with the 'good-as-gold' USD continuing to lose its purchasing power over time, Johnson provides some thoughts on the periods of deflation and how gold plays into that end-game: "If gold were not a good store of value, why do all the central banks of the world store it and hold on to it - even when crises abound?"

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Fri, 06/22/2012 - 14:21 | 2551870 Fips_OnTheSpot
Fips_OnTheSpot's picture

Barbaric! Must go polish some ounces now.. :D

Fri, 06/22/2012 - 14:25 | 2551891 veyron
veyron's picture

Am I allowed to stitch gold into my clothing even though I'm not jewish and it's not the 1930s?

Fri, 06/22/2012 - 14:35 | 2551899 Pladizow
Pladizow's picture

Must Read - Money: The Greatest Hoax on Earth - Merrill Jenkins - Published in 1971.

To: Veyron - Yes and you may also be able to hide it in your foreskin!

Fri, 06/22/2012 - 14:37 | 2551944 NotApplicable
NotApplicable's picture

In other news, they just don't make Greek Finance Ministers like they used to.

Fri, 06/22/2012 - 14:40 | 2551955 AldousHuxley
AldousHuxley's picture

it is rigged.

Gold will go up along with inflation but government will special tax it so every transaction you actually lose money.


plus in general beware of any investment that is at 30 year highs.


bernanke is going to pull japan deflation on china in a few years after chinese dumb money overinvests in US assets. that's how US keeps coming on top, but deflation = gold prices sinking.

Fri, 06/22/2012 - 14:47 | 2551988 akak
akak's picture

"Deflation" under a fiat currency regime is merely a fantasy of the hopelessly brainwashed or the dishonest and desperate propagandists.  If that is the outcome you expect from this financial and monetary collapse, prepare to lose your life's savings, and don't cry later that you weren't warned.

Fri, 06/22/2012 - 14:51 | 2552011 GeneMarchbanks
GeneMarchbanks's picture

See: Minsky Moment but before you do make sure you understand EMT.

If that doesn't do it for you: "If inflation is a monetary phenomenon, then hyper-inflation is a political one" --Hugh Hendry

Fri, 06/22/2012 - 14:59 | 2552035 francis_sawyer
francis_sawyer's picture

Granny is gonna get rich beyond her wildest dreams because with hyper DEFLATION [snark], her social security check will soon be able to buy her bricks & bricks of gold...

Yeah... that's the scenario I see... Keep telling yourself that and soon enough you'll think it's true...

Fri, 06/22/2012 - 15:01 | 2552045 akak
akak's picture

I'll take the hundreds of examples of fiat currency failure over thousands of years of monetary history over some egghead statist's ivory-tower academic theories with no basis in historical fact, thank you.

Fri, 06/22/2012 - 16:46 | 2552445 Captain Kurtz
Captain Kurtz's picture

Very interested in historical currency deflations that are relevant.  Could you humor me?

Fri, 06/22/2012 - 17:39 | 2552569 BooMushroom
BooMushroom's picture

There are very few examples of deflation, and no examples of hyperdeflation on Wiki: and there isn't even an entry for hyperdeflation.  the "debt deflation" page lists NO examples.

Hyperinflation, however, has 32 historical examples, which start at four digit percentages, and end with numbers best expressed in scientific notation (i.e. Hungary post WWII = 89.7x10^21).

And, yeah, granny's pension and social security checks will NEVER buy her gold bullion, land, or private jets.

Fri, 06/22/2012 - 18:51 | 2552718 francis_sawyer
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or even catfood...

Sat, 06/23/2012 - 02:08 | 2553219 americhinaman
americhinaman's picture

japan... 30 years of deflation.  i don't care what CPI says, the yen cost of living has gotten cheaper and cheaper for over a generation, and japan has printed more money as a function of its economy than even greece.

Fri, 06/22/2012 - 15:09 | 2552071 fonzannoon
fonzannoon's picture

I am certainly steering clear of one investment at 30 year highs. Bonds.

Fri, 06/22/2012 - 15:40 | 2552174 AustriAnnie
AustriAnnie's picture

"government will special tax it so every transaction you actually lose money"

Just like it currently taxes all the black market cash transactions that take place daily? 

Fri, 06/22/2012 - 16:39 | 2552426 Ookspay
Ookspay's picture

Yes Annie, reality trumps theory everytime.

Fri, 06/22/2012 - 15:44 | 2552198 Quinvarius
Quinvarius's picture

The road to bankruptcy is paved with simple minded maxims heard on CNBC.  Deflation most certainly is not bad for gold.  In fact, if you actually understand the term deflation when used in the context of a fiat monetary system, you will also understand it makes the fiat currency lose value under the weight of defaults and not having an economy or tax base.

Fri, 06/22/2012 - 16:22 | 2552358 Ignorance is bliss
Ignorance is bliss's picture

Stupid idea: All the Gold would then leave the U.S. into Mexico, Canada, Caribbean Islands, etc... never to return. Then again sounds like something Washington would come up with.

Fri, 06/22/2012 - 17:09 | 2552496 sessinpo
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Deflation will happen regardless. It is not something BB or Japan pulled. Japan inflated tremendously for years to try to combat deflation. That is also what BB is doing because with massive debts, all the money that is newly created doesn't flow through the economy and create inflation across the board. Instead that money goes poof - it services the debt already on the books and only compounds the problem later on.

These are market forces and they eventually win no matter what monetary, political or fiscal games are played.

Fri, 06/22/2012 - 18:52 | 2552721 francis_sawyer
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The why aren't all the Japanese grannies UBER WEALTHY because of all the gold bullion they bought?

Sat, 06/23/2012 - 06:03 | 2553300 Disenchanted
Disenchanted's picture




"why do all the central banks of the world store it(gold) and hold on to it - even when crises abound?"


to control it, just like they control the fiat, fractional reserve currencies...

Fri, 06/22/2012 - 21:35 | 2552959 holdbuysell
holdbuysell's picture

Thanks for sharing.

My biggest take-away and eye-opener:

Putting those two in an MSM interview together back then would be similar to putting a Tyler and a rep of the Federal Reserve of St Louis in one today (Bullard?).

In fact, does this kind of debating ever happen today? Look at Bernanke's softball conferences. Ridiculous. I still want to know what that 'other' bucket on the balance sheet is that keeps growing.

How times have changed.

Fri, 06/22/2012 - 15:00 | 2552042 Freewheelin Franklin
Freewheelin Franklin's picture

No. But you can stitch your diamonds and rubies into your clothes if you are Russian royalty. 

Fri, 06/22/2012 - 15:21 | 2552101 GeezerGeek
GeezerGeek's picture

You can stitch gold into your clothing but then you have to stay away from deep water. It's one thing to have gold in your boat when it sinks, as you can always swim away. If the gold is in your clothing and the boat sinks, either you sink or you emerge from the water naked. maybe that's fine with you, but I'd hate to be laughed at that way.

Fri, 06/22/2012 - 16:41 | 2552432 Ookspay
Ookspay's picture


Fri, 06/22/2012 - 18:04 | 2552622 BooMushroom
BooMushroom's picture

Depends - I think I could manage to swim with an extra 32 ounces of gold.  That's a years salary, and plenty to get you started anywhere.  Not that I actually have two pounds of gold, of course.  You know with the boating accidents and all...

Fri, 06/22/2012 - 20:09 | 2552856 dark pools of soros
dark pools of soros's picture

one of these days you might spend that gold on some better boats..

Sat, 06/23/2012 - 06:31 | 2553315 Disenchanted
Disenchanted's picture


"It's one thing to have gold in your boat when it sinks, as you can always swim away."


what do you expect when you buy a concrete lifeboat?



Surviving The Apocalypse... In A Lifeboat


Fri, 06/22/2012 - 17:48 | 2552585 4horse
4horse's picture

"If gold were not a good store of value . . . " etc etc

and if the original version was really If I Were A Rot s child . . . 

then, bb, there only ever was one answer:
when it comes to that balance of books . . .


Tra Dish shun


Fri, 06/22/2012 - 14:21 | 2551875 Roy Bush
Roy Bush's picture

How come Zerohedge never features Martin Armstrong's writings?

Fri, 06/22/2012 - 14:35 | 2551937 NotApplicable
NotApplicable's picture

Good question.

Fri, 06/22/2012 - 14:46 | 2551984 vortex
vortex's picture

Come on... Armstrong has been through all that pain because he stand in front of "the club", what did you expect?

Fri, 06/22/2012 - 14:50 | 2551999 THECOMINGDEPRESSION

Some say Martin has lost his mind since he came out of prison. I believe he has been silenced. Jim Sinclair thinks the same.

Fri, 06/22/2012 - 16:07 | 2552298 Thisson
Thisson's picture

Because some of us don't like reading things written in crayon?

Fri, 06/22/2012 - 14:22 | 2551876 JimRogers
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CEO of Goldmail pushing gold.


Thanks ZH!

Fri, 06/22/2012 - 14:24 | 2551886 LoneStarHog
LoneStarHog's picture

Would you be interested in adding some INTELLIGENT discourse about what the person STATED, rather than attacking the person and his position?

Fri, 06/22/2012 - 14:27 | 2551901 JimRogers
JimRogers's picture

Couldnt get the presentation to play. So I can't comment on substance.

And your vociferous defense posted at 06/22/2012 - 14:24   of a 10 minute presentation posted at 06/22/2012 14:19 -0400 is pretty asinine.


You are evidence of a bubble.

Fri, 06/22/2012 - 14:29 | 2551905 Pladizow
Pladizow's picture

I'll take that bet!

Fri, 06/22/2012 - 15:58 | 2552259 Bring the Gold
Bring the Gold's picture

Riiiiight, just like the endless endless "we buy gold" and now "We buy silver" and even the occasional "We buy platinum" signs, and ads everywhere I fucking turn and all the proles and middle class selling into that. Yeah, when the shoe shine boy says sell grandma's gold, thats fantastic evidence of a bubble. Where would you put your money right now?

Fri, 06/22/2012 - 16:54 | 2552462 JimRogers
JimRogers's picture

Palladium futures, south sudanese pounds, short monolines and bitcoin, plus the typical BBB.

Fri, 06/22/2012 - 19:36 | 2552806 moonstears
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Fri, 06/22/2012 - 14:29 | 2551904 disabledvet
disabledvet's picture

"Phuck you asshole."

Fri, 06/22/2012 - 14:45 | 2551980 Sandoz
Sandoz's picture

This is hillarious. This CEO argues that gold is a good store of value because: 1) money is misunderstood; 2) 'fiat' money is a poor store of value; and 3)  Gold is an excellent store of value.  Read that. Let it sink in. Is that not the most absurd argument you've ever read? And yet you're attacking the guy who's attacking this paid advertisement? 


Fri, 06/22/2012 - 14:49 | 2551993 Pladizow
Pladizow's picture

That was a summary - and I think the video which is not working, may elaborate - So Calm down.

Fri, 06/22/2012 - 14:59 | 2552039 JimRogers
JimRogers's picture


Fri, 06/22/2012 - 15:35 | 2552161 lasvegaspersona
lasvegaspersona's picture

For an intellegent and much more elaborate discussion of the MoE and SoV aspects of currency and gold FOFOA is well worth the effort. He has posted several long pieces on the historical role of gold and analyzes some of the historical events that have changed those roles.

Fri, 06/22/2012 - 14:49 | 2551995 fonzannoon
fonzannoon's picture

jim rogers does not believe gold is a bubble. just a fyi jim rogers...

Fri, 06/22/2012 - 14:58 | 2552036 JimRogers
JimRogers's picture

You should totally believe everything you hear on CNBC and read on the interwebz.


Cause people are honest and generous with investment theses. Surely they would share any informational assymetry live on national television in exchange for $200 appearance fee.

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